Independent Contractor Versus Employee

1099 Employers: Hiring with Compliance Confidence

Before hiring an independent contractor, it’s best to be fully prepared for this type of working relationship. A professional 1099 risk mitigation firm like Secure Talent is a good option for employers because it can establish up-to-date 1099 procedures and simplify compliance requirements when dealing with independent contractors versus employees.

1099 employers who would like to manage independent contractor relationships in house, should follow steps to keep in compliance in case their business is targeted for an audit by the IRS or other government body. Some of these guidelines include assessing the business that the potential IC has established, requiring certain documentation and creating a special file for it, entering into a sound agreement and more.

1099 Hiring: Manage Compliance Risk Prior to Engaging an Independent Contractor

It’s important not to allow prospective ICs to fill out an employment application. In order to be safe, the employer should have the independent contractor fill out a questionnaire specific to 1099 workers versus one made for employees during the hiring process. This questionnaire should cover important information such as what type of business entity the IC has, companies the consultant has performed services for in the past couple years and questions about the contractor's employees, degrees, licenses and more.

Determine Independent Contractor Versus Employee Classification

Several factors could classify ICs as employees or vice versa. Because the laws from state to state vary and because the requirements are ever changing, it’s a very difficult scenario to manage. This is why a 1099 risk management firm can be so valuable for employers managing independent contractor compliance. A good 1099 compliance service will stay up-to-date on all the laws regarding proper worker classification across the country. And it should be thoroughly trained in mapping out strategic assessments of a business’ IC practices and its potential risk.

At the very least, Secure Talent recommends that employers hiring 1099s should have a checklist established that helps to determine if the worker in question can, in fact, be classified as an independent contractor versus an employee. This includes creating a document that allows the employer to compare the independent contractor’s services and its scenario against federal and state compliance guidelines.

Create Solid 1099 Files

For every independent contractor an employer engages, thorough 1099 files should be kept separate from regular employee files to help prove compliance in the event of an audit. Before hiring 1099s, certain documents need to be obtained from independent contractors, versus what you would normally obtain from regular employees. Some important documentation includes:

• All invoices submitted for billing purposes.
• Business cards and marketing materials.
• Copies of 1099 forms by other companies that the consultant has provided services to.
• Copies of tax returns showing the contractor filed a Schedule C for the past couple years if he or she is a sole proprietorship.
• Fictitious business name if applicable.
• List of equipment and materials the 1099 professional will use to perform services and costs.
• Names and wages of all assistants utilized by the IC in the past couple years.
• Office lease(s) if applicable.
• Professional licenses.
• Proof of insurances.
• The signed independent contractor employment agreement and any other drafts of it.
• W-9 form signed by the consultant.

Disclaimer: The content in this Web site is designed to provide educational information and should not be considered legal advice.

Let Secure Talent determine independent contractor versus employee classification for your workforce. Contact us today either online or call 800.778.0197.